A blockchain is a form of ledger.
A ledger is a book or collection of accounts in which account transactions are recorded. Crypto transactions are not recorded in a book. Rather, they are recorded in computers in the form of “blocks”.
These blocks list crypto transactions. Whenever you send or receive cyrpto, the event will be written into a block. As each block is written and closed, a new one is added to the chain of previous blocks. These blocks of transactions are called a blockchain.
Literally, a blockchain is a chain of blocks. The chain of blocks form a ledger.
Why even have one?
If you want to send bitcoin to someone, you can.
If you want to send US$ to someone, you can.
However, when you send US$ to someone, multiple banks need to be involved to validate the transaction. You don’t really send US$ to a person, you send it to their bank account.
Bitcoin doesn’t involve banks. When you send someone bitcoin, it goes straight to them. That transaction needs to be recorded and validated. Technically, it’s not even a send and receive function, rather a change of ownership.
This is what blockchains do. They record and validate the change of ownership.
What does a blockchain look like?
The blockchain exists as code.
You can look at transactions on the blockchain using the Blockchain Explorer at Blockchain.com.
Who controls the blockchain?
Just like no one controls the internet, no one controls the blockchain. In theory anyway.
Blockchain networks rely on a decentralized infrastructure. No one person or group controls it. Rather, all those who participate in it agree to abide by its rules.
These rules are set in code.
Can the blockchain be hacked?
Technically yes, but it is almost impossible to do.
The blockchain provides the security needed to avoid people double spending the same money.
It is secured by a decentralized structure. You might be able to hack one computer, but it is very difficult to hack a majority of the computers that make up the network and then get them to agree, and for this change to remain undetected.
How are blocks added?
Blocks are added by a process known as mining.
Mining requires computing power.
To pay for this computing power, Bitcoin miners receive payment for validating the transactions. The transactions are validated by machines that try to solve a mathematical problem. The miners who solve the problem first get to write the next block and earn the reward.
There are multiple transactions within each block. Once one block is closed, the competition begins again to add the next new block. Just like a physical paper-based ledger, a block can become full so a new block has to be created. Old blocks become part of the blockchain forever and are a record of historic transactions
There is a lot of competition to earn these rewards.
Here’s what a large bitcoin mine looks like:
There mines are typically made up of hundreds of banks of graphics cards. These cards can process code quickly increasing the likelihood of winning the competition to write a block.
You could run a mining operation on your computer. However, it is unlikely to win a competition against a mine with considerable computing resources.
SummaryA blockchain is a fancy word for ledger. It is a distributed ledger and is held on millions of computers worldwide.